Manhattan’s GM Building Lands $2.3B Refi

By Gail Kalinoski

General Motors Building

Boston Properties, which owns 60 percent of the General Motors Building at 767 Fifth Ave. in Manhattan, said its consolidated joint venture entity has completed a $2.3 billion refinancing of the 50-story, 2 million-square-foot trophy tower that replaces $1.6 billion in debt that was maturing in October.

The REIT did not identify the sources of the refinancing, only describing it as a group of lenders during the firm’s late April first-quarter 2017 earnings call with analysts. At that time, CFO Michael LaBelle called it “the most significant financing that we plan to complete this year.”

The Loan

The new mortgage financing bears interest at a fixed-rate of 3.43 percent per annum and matures on June 9, 2027. The loan requires interest-only payments during the term of the loan, with the entire principal amount due at maturity. It replaces $1.6 billion of first mortgage and mezzanine loans that were due to expire in October with an interest rate of 6 percent. LaBelle, also an executive vice president and the firm’s treasurer, said during the April earnings call that the REIT had been “in the market for replacement financing to repay both the existing loans and provide additional proceeds based upon the significant growth in cash flow we’ve generated since our acquisition,” according to a transcript provided by SeekingAlpha.

LaBelle noted that the refinancing would save the REIT $9 million each year even though it was borrowing an additional $700 million. Boston Properties said this week it planned to use a portion of its share of the net proceeds to repay $310 million of borrowings under its $1.5 billion unsecured line of credit and for other working capital purposes.

“The deal was in-line with our expectations and show continued robust lender of interest for top-tier assets in core markets in the large loan/single borrower CMBS market,” Stephen Boyd, Director-REITs, at Fitch Ratings, told Commercial Property Executive.

Changing Hands

Boston Properties, along with Meraas Capital and Goldman Sachs, bought a 60 percent share in the office and retail tower in the Plaza District in 2008 for $2.8 billion from Macklowe Properties, according to CPE. It assumed the $1.6 billion loan held by Hypothekenbank Frankfurt, which had been originated on Sept. 12, 2007, by Deutsche Bank, according to Yardi Matrix data. Owners of the remaining 40 percent at the time were Qatar Investment Authority and the Kuwait Investment Authority, which paid $1.1 billion, according to Yardi Matrix data. Together the skyscraper sold for a record-setting $3.95 billion in 2008. In June 2013, the 40 percent share was sold for a reported $1.4 billion to Sungate Trust, formed for the benefit of the family of Zhang Xin and M. Safra and Co. Inc., the New York-based investment firm of the Safra family. CPE reported at that time the sellers were the Goldman Sachs U.S. Real Estate Opportunities I fund and Meraas Capital.

The Tower

Built in 1968, the tower is home to tenants such as the Weil, Gotshal & Manges law firm, General Motors, Estée Lauder Cos., and Icahn Enterprises. With street exposure to Fifth and Madison avenues, the building also has about 150,000 square feet of retail including Apple, which is known for its iconic street-level glass cube and plans to more than double its interior retail space to about 77,000 square feet after a renovation. Under Armour, which signed a lease in 2016 for 53,000 square feet, is expected to move into the former FAO Schwarz space possibly by next year.

“This asset obviously has great cash flow characteristics, long-term leases and still has a lot of built-in growth because of the below market in-place leases,” LaBelle said on the earnings call.